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These difficulties are based far less on financial, tax or juridical factors, but rather on the corporate culture. The integration process can only succeed, if it is supported and forwarded by the members of an organisation. They want to find the already existing values, norms and thinking - briefly corporate culture — in their company, after a merger. Nevertheless, the reality often looks different. If two enterprises merge, two different corporate cultures clash.

Thus, a defence reaction against the process of change is caused by fear and uncertainty of the employees. This phase is decisive concerning the success or failure of a merger. The adherence to values and basic assumptions of the own culture results in a rejection of a new culture through members of an organization. The real targets of the transaction are difficult to reach under these circumstances. The cost of the transaction is often higher than the monetary benefit, for example from synergy effects. Those, who only rely on financial figures in this context and disregard the cultural factors during the integration process risk a failure of the whole merger.

It seems advisable to orientate oneself towards the procedure of a merger. Concretely, this means the recourse on a structured and integrated phase model.

Emerging trends and developments of country-specific defense strategies against hostile takeovers

By the adoption of the cultural-SWOT-analysis in combination with the cultural benchmarking in the pre-merger phase and the integration balanced scorecard as a control mechanism in the post-merger-phase this paper should show a new, promising approach that have never been used before in this context. The focus is on the corporate culture as a complex and fundamental appearance of the company to raise the awareness for creating a shared system of values and norms.

An additional goal is to present and discuss the suitability of the integration models, which are discussed in the literature and which underline the importance of the corporate culture. This academic paper will thereby focus on the following research issues:. This academic paper is a pure literature analysis. To process the problem statement, this paper is structured into 5 parts. The first chapter provides an overview of the problem statement and content of the single chapters. Beside the definition of the terms: The basics of the corporate culture will be explained in the third chapter.

An introducing definition of the terms culture and company culture, will be followed by the presentation of the so called threelevels- model from Edgar Schein, which helps to understand the phenomenon of the corporate culture easier. On this basis, a discussion about the single functions that can be fulfilled by a corporate culture follows.

The third chapter ends with a critical discussion about the positive and negative effects of corporate cultures with regard to possible, as mentioned in the beginning, problem areas in the post-merger-management. This should emphasize the importance of the corporate culture in the post-merger-management.

After that, six integration models discussed in the literature will be presented. This will be followed by a critical appraisal of these six models, also with regard to the practicality and an outlook on possible future fields of research. The academic paper closes with a conclusion. This is followed by a classification of the process into three stages. The chapter ends with a short discussion of the success factors. This is also referred to as a proxy battle. Most likely, they will accept it or need to find another defense strategy.

Otherwise, they make themselves liable of having destroyed shareholder value. Beside this definition it would be interesting to know which opinions argue for and against hostile takeovers. This will be discussed in the following chapter. Maximization of shareholder value is the primary objective of all entrepreneurial activities. Based on this striving, there are many theories which are supposed to proof how corporate takeovers can generate added value. Corporate takeovers - according to the postulate of synergy effects - are conducted on a rational basis with the objective to increase the consumption of operating, financial and management synergies.

This is based on the consideration that a combination of two companies is able to operate more efficiently and cost-saving as opposed to two companies, which act independently of each other. From the avoidance of dual functions arises the potential of saving expenses, which serves the objective of value enhancement. Financial synergies can be created through the merger of equity and debt. The purchase of loans becomes easier as the creditworthiness is improved. Thus, borrowing costs can decrease. Additionally, leadership-synergies can be achieved when the management of the acquiring company disposes of skills that can make processes of the target company more efficient [17].

Frequently mentioned is the reason that a target company is perceived as being undervalued and therefore becomes a victim of a takeover. In this case, the share price of the target company does not reflect the real value of the firm. This can be explained in several ways. Quite often, it is due to the assumption that management works inefficiently [18]. The acquiring company is ambitious to create a value enhancement, once the target has been taken over — through the improvement of management and efficient usage of resources.

A further aspect concerns the market power of a company, respectively, the individual market outlook. Takeovers of companies within the same industry are supposed to enhance the market position and increase market share [19]. Thus, the new company may hold a "monopoly position" and is taken to a higher level, where it can have a greater influence on the price structure.

These reasons are opposed to other aspects, which argue against a hostile takeover.

German mergers & acquisitions in the USA : transaction management and success

According to general assumptions, hostile takeovers usually negatively affect the behavior of the target company's management [20]. The management puts all its efforts in the defense of the existing bid. In order to fight against the attack of bidders, the management is merely focused on the care of its share price. Thereby, corporate policy is more interested in short-term advantages and loses sight of the more sustainable long-term perspective. Often, a takeover goes hand in hand with a change in management. Based on this fact, management is likely to fight for its own job. If management gives up the defense battle too soon — e.

The corporate identity then also suffers from a takeover battle. Big takeover battles are under continuous observation by the public. The media might prejudge negatively or only to one side, which can result in a substantial loss of reputation for the company. On the Human Resource level there remains the risk of employees loosing motivation, and therefore, job satisfaction.

Basically, a corporate takeover means primarily uncertainty regarding the future of the company.


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My analysis incorporates economic as well as legal aspects of this subject. Basically, the common objective of all defense measures is to gain time; either to develop alternatives for shareholders and management, or to ensure that the company does not change ownership at a too low value Appendix L. Also, in case of a hedge fund having the required amount of capital budget only for a certain time period, a delay could be a deal breaker as well.

The following aspects include defense alternatives against hostile takeover attempts. Shortly, I will address the different legal conditions of both Germany and France. In general, defense strategies have to be examined by the management if they can withstand legal audits [21]. The question is, if the board of directors as an employed management body is authorized to adopt measures in order to defend its company against public offers — also without the approval of the shareholders.

At this point, one should have a look at discussions, recently happened on a European level. Until now, each EU member country had its own individual laws regarding regulations of public takeovers. These policies also embody the possibilities of permitted defense measures. It also includes the alternative of a "pooled decision", which allows the board of directors of the target company temporarily to defend itself against undesired takeover attempts. Numerous alternatives are given, especially for preventive measures to avoid hostile takeover attempts.

On the other hand, tools - which can be adopted autonomously and systematically from the management body against hostile takeovers — are not prohibited by law in Germany. In fact, it is permitted for the management to seek and find approval by the annual general meeting. The biggest hurdle for takeovers in France is the multiple voting right [24]. Shareholders, who have been holding shares for a longer period — usually 2 years — are granted a double voting right by the company.

However, this is an option which is not taken by everybody. Hence, it is essential to pull those shareholders already in the forefront of a takeover on one's side. Thereby, the board of directors in France is given the possibility to defend itself against unfriendly takeovers [25]. After discussions of 15 years, a cross-national policy has been implemented. According to this, management is generally obliged to keep up perpetual neutrality.

Not the board of directors but the owners — namely the shareholders — are to decide if an offer should be accepted or not. Therewith, interminable takeover battles are supposed to be avoided. However, this policy is not binding, against the will of the former EU-commissioner Bolkenstein [26]. This is a compromise-solution, which makes especially advances to Germany. The original proposal earmarked, that the multiple voting right as existent in Scandinavia or the double voting right as in France shall be persisting, but the German "pooled decision" is to be abolished.

Since , there are no more special voting rights. German companies did not dispose of any other defense measures and therefore felt disadvantaged. The policies in France and other EU-countries also remain existent. Companies may opt if they comply either with the liberal European law or rather with the more protectionist policies of their home country. As a consequence, defense strategies will remain valid — according to the legal framework in those countries, in which the companies are based. The EU member countries can decide, if they will adopt national law or rather the new liberal EU takeover directive in case of corporate takeover situations.

The directive, which was finally adopted in , was created to make it more difficult for target companies to use poison pills, just like issuing new shares or entering into complex joint ventures. When addressing once more the issue of the German legal basis in more detail, we can conclude the following: It substituted by the voluntary takeover codex. An important characteristic is now the threshold, at which the legislator acts on the assumption of control of a target company: However, it refers only to shares of equal types common or preferred.

The decision of the bidder of making an offer has to be made public without measurable delay. After the decision for an offer, the bidder is urged to send a notice to the administrations of the stock exchanges. Before the notice can be made public, only the administration is allowed to use them in order to decide if the determination of the market price has to be intermitted or even discontinued. The time limit for the acceptance of the offer must not be less than four weeks and must not exceed the ten-week-threshold.


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  6. The term of acceptance starts with the publication of the submission of the offer [29]. Subsequent to that follows a statement of the management and the supervisory board of the target company. Defense measures adopted by the management, the annual meeting or the shareholders are by all means common and permitted in the forefront of a takeover offer, provided that the matter of case is maintained under company law.

    Thus, a part of the shares of the threatened company is owned by a friendly company. Hence, the takeover of control is made impossible, as the shares — which are essential for gaining a majority — are held by other companies. This alternative is widely spread in the Rhenish capitalism [30] Appendix K. However, I have to point out that the creation of reciprocal investments held leads to reductions at the capital market [31].

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    The equity structure for preventive defense measures is therefore of vital importance. When the equity stock is allocated according to defense-strategically considerations and when these shares are traded at their real value, a hostile takeover appears often unattractive for speculative reasons. Following, the different securities are explained and analyzed regarding their suitability for a preventive takeover defense.

    In particular Germany disposes of some special features in this context. The bearer share is a real bearer paper. Its advantage lies in the uncomplicated transferability. Thus, it remains the risk that the real circumstances might not outcrop until the annual meeting or do not even become generally known due to fiducially proxies.

    Correspondingly, one has to refrain from a predominant equity composition of bearer shares. Especially exposed to takeover risk are publicly owned firms listed on the stock exchange. With unlisted corporations it is the individual case and the allocation of bearer share equity which is the key factor [32]. Thus, it is absolutely possible that a small family company with mainly bearer stock can avoid an undesired sale of their firm due to family structures and internal agreements.

    German mergers & acquisitions in the USA : transaction management and success - EconBiz

    But even in such a case the remaining risk of a sudden sale cannot be excluded from consideration. Which measures can be undertaken by a corporation whose equity is predominantly composed of bearer shares? In the first instance, the equity capital has to be restructured early. The following alternatives are available:. In this thesis, the increasingly important "Management Buy Out" will not be addressed in detail.

    The purchase of the own company through the management financed from own resources is mainly possible with small cap companies. Companies with bigger market capitalization can usually only be bought with the support of debt financing, which creates the necessity of seeking investors. In addition, both the management and indirectly the company are exposed to the risk of a high level of debt [33]. At the bottom line, equity — composed totally or partially of bearer stock — is under defense-strategic considerations virtually unprotected against corporate takeovers. This potential status quo should be improved by a restructuring of the equity structure, striving for a majority of nominal shares.

    The application of preventive defense alternatives using nominal shares:. The company is allowed to check within the scope of registration if the transaction has been conducted in compliance with the law [35]. If the formal audit leads to a substantial doubt about its legitimacy, a second audit would be conducted in order to check the validity and authenticity of the endorsements. With the authorization regarding the registration in the stock register, the administration has a tool which allows control of the identification of individual members.

    Thereby, a vague estimation of the allocation of stocks is possible. The very fact, that common nominal shares have the characteristic of a more complicated transferability compared to the bearer share makes it a less attractive security - from an acquirer's point of view. Nevertheless, companies issuing nominal shares have a certain level of control about the allocation of ownership with the stock register. However, it could be harmful that the acquisition of nominal shares via straw men [36] cannot be controlled. In some cases, acquirers get hold of blocks of nominal shares through the interposition of an intermediary for confidential reasons [37].

    They do not want the company to take notice of the stealthy change of ownership. The stock register only shows the direct shareholders of the company and the real ownership situation cannot be seen from this register. Thus, the transfer of nominal shares to straw men can neither be controlled nor prevented by the stock register. Furthermore, the stock registration does not shed light on the ownership situation of registered nominal shares and does not provide a reliable control of the power structure within the capital stock. For this reason, the administration will not be able to identify an unfriendly takeover well in advance, when acquirer pursues this strategy of "purchase-splitting".

    If the acquirer of common nominal shares accomplishes the preconditions of registration and if there is no evidence for a merely fictitious ownership, the company has to conduct the registration and to acknowledge the acquirer as a legitimate shareholder. The fictitious position usually becomes obvious — as most cases have shown in the past — when the battle for control in a takeover situation starts. One measure in order to avoid a concentration of nominal shares in one hand is the numerical statutory limitation of registered nominal titles per shareholder in the stock register [38].

    This leads to a delay and accordingly to a higher difficulty of the takeover. If a company gets under pressure due to oppositional investors, the stock register gets often closed for a certain time period. However, this requires an educated guess with solid evidence and will be of short duration anyway in case of success.